LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A Tax-Free Savings Account (TFSA) provides:
- ADeductible contributions, so the client reduces taxable income in the year of the deposit
- BRequired withdrawals starting at 71, in the same way as an RRSP that has matured
- CTaxable withdrawals, since the growth inside the account has never been taxed
- Non-deductible contributions, tax-free growth and withdrawals, with room restored next year
Correct answer: D) Non-deductible contributions, tax-free growth and withdrawals, with room restored next year
TFSA withdrawals do not affect income-tested benefits, making it valuable for low-income and retired clients. Over-contributions attract penalty tax.
Why the other options are wrong
- ATFSA contributions are not deductible.
- BNo maturity or minimum withdrawal rules apply to a TFSA.
- CWithdrawals are tax-free.
Exam tip
TFSA: no deduction, tax-free growth and withdrawals, room restored next year.
Common mistake
Re-contributing a withdrawal in the same year and over-contributing.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.